A joint report by Greenpeace, the Sierra Club and CoalSwarm indicates that Southeast Asia will be the new epicentre of coal production. Asia accounts for 85 per cent of new coal power development in the world’s top 20 coal producing countries, with China as the leader of the pack. However, while tighter restrictions on domestic coal plants have been imposed by the central government to curb pollution, Beijing has pushed the development of high-efficiency, low-emission coal plants across Southeast Asia as part of the “Belt and Road Initiative”.
As China is expanding its influence, Beijing’s foremost strategic competitor in Asia, Japan, is being forced to step up efforts to combat its shrinking influence in the region. The booming energy sector of Southeast Asia, especially coal, is proving to be the new front line in the geopolitical rivalry between Asia’s two industrial giants.
China’s coal drive is part of a larger energy-driven investment policy that follows its attempt to reduce carbon emissions by clamping down on the coal industry and pledging to increase investments in renewables. However, Chinese energy planners have realised they cannot relinquish coal as a major power source for the foreseeable future. The country remains highly dependent on coal, with coal sources accounting for roughly 73 per cent of China’s electricity production in 2014, according to World Bank numbers. Instead of abandoning coal, China is developing cleaner and higher-efficiency coal plants – and, as a boon to its plan for greater regional influence, aims to export the technology abroad.
China is developing cleaner and higher-efficiency coal plants – and, as a boon to its plan for greater regional influence, aims to export the technology abroad
To that end, the China Development Bank and China Export Import Bank last year lent US$25.6 billion to global energy projects. This figure surpassed even the US$22.6 billion provided by the International Bank for Reconstruction and Development.
From a market perspective, Beijing’s plan to become the world’s primary high-efficiency, low-emission technology provider comes at the right time. Coal consumption across Asia is slated to outpace that of China over the next 20 years, coupled with an absolute increase in global coal demand over the next seven years. The more than 1,600 coal plants scheduled to be built by Chinese corporations in over 62 countries will make China the world’s primary provider of high-efficiency, low-emission technology.
Because policymakers still regard coal as more affordable than renewables, Southeast Asia’s industrialisation continues to consume large amounts of it. To lift 630 million people out of poverty, advanced coal technologies are considered vital for the region’s continued development while allowing for a reduction in carbon emissions.
Clearly, the countries providing this technology will inevitably expand their sway with regional governments. As a consequence, a race between Tokyo and Beijing over the construction of coal plants is already under way.
China is currently in the lead, having overtaken Japan in 2000 as Asia’s leading exporter of coal industry equipment. It remains the largest technology supplier to India and the second-largest investor in coal projects in Vietnam, behind Japan. It is also constructing Bangladesh’s first clean coal plant. These developments reflect Beijing’s advantage in providing the necessary coal funding. China has been “greening” for years, developing renewables and carbon capture technologies at breakneck speed, while also investing more aggressively in the region than Japan at a time when most multinational banks have restricted coal funding. The results speak for themselves. Between January 2010 and March 2017, the Japan Bank for International Cooperation was involved in five financing deals while Export-Import Bank of China inked seven.
But Japan is not exactly twiddling its thumbs, either. Since the 2011 Fukushima disaster, Tokyo has ramped up coal use and has raced ahead in clean coal technology development. Japan now boasts the world’s most efficient coal-fired plant, which uses less coal to produce more electricity. Seizing on this competitive advantage, Japanese Prime Minister Shinzo Abe has tried to capitalise on these capabilities in a bid to increase Japan’s reach across Southeast Asia – and in China’s backyard. Through the Japan-led Asian Development Bank, Tokyo has pledged US$6.1 billion for projects throughout the Mekong as well as for various other projects from Vietnam to Myanmar, providing an alternative to China’s regional designs.
What’s more, Japan will soon receive a boost from the Trump administration through the Japan-United States Strategic Energy Partnership. The partnership could be a game-changer in terms of Sino-Japanese energy competition, with a joint commitment by Tokyo and Washington to promote high-efficiency, low-emission deployment throughout South and Southeast Asia. With the Trans-Pacific Partnership in the doldrums, the new partnership is designed to counter Beijing’s energy diplomacy through a more coherent bilateral push.
This may well be only the beginning. US Energy Secretary Rick Perry has repeatedly emphasised that coal will be a key part of the Trump administration’s policies. Washington is already working to launch an international alliance that is set to include a host of other countries committed to introducing clean fossil fuel technologies – including a number of Association of Southeast Asian Nation states.
Given that Southeast Asia will account for a large part of the world’s coal use in the coming decades, the geostrategic battle lines are already drawn. Both the US and Japan have a clear interest in limiting China’s rising dominance. Apart from the military dimension, soft power aspects like energy are emerging as the battlefields of the future. Through the partnership with the US and a possible clean coal alliance, Japan may finally have the support it needs to keep up with Beijing’s